Is It Time to Dump Canadian Solar?

2015 was a decent year for Canadian Solar (CSIQ), but it is off to a terrible start this year. In its most recent earnings, the company shared EPS and revenue of $1.05 and $1.12 billion, beating the analyst estimates of $1.28 and $956.15 million, respectively.

The solar sector has become a very sensitive sector, as major companies like SunEdison (SUNE) are continuously moving downward at a rapid rate. Abengoa has already filed for bankruptcy, and it is highly likely that SunEdison will face the same situation very soon.

If this happens, then the loss of SunEdison will make it easier for Canadian Solar to gain projects with outstanding financials.

At present, the chief rival of solar companies is uncertainty. For the Q1FY16, Canadian Solar expects revenue in the range of $645 million to $695 million and it is important for the company to meet these estimates so as to keep investors from fleeing.

In spite of beating fourth quarter forecasts, the company’s Q1FY16 revenue prediction is approximately $100 million less than the consensus estimates. Another problem is that Canadian Solar is not certain if it needs to form yieldcos to handle its solar and wind farm assets. If Canadian Solar chooses to create a yieldco, it will mean less viability to expose for investors as the value of solar and wind farms have ascended.

However, Canadian Solar has a trickle of attributes that could make it an outstanding long-term value stock. Bears might take the company’s foreign exposure as a flaw. Conversely, India, parts of Europe, and Asian markets remain sources of future solar growth. Therefore, Canadian Solar is shifting its focus towards these markets and it could be beneficial in the long-run.

Apart from that, this choice is a huge selling point with the company. However, a yieldco has been conferred for more than a year now and there are many problems creating one, the company could have the choice of wrapping its solar and wind farms in an asset sale. This could prove to be a clever step that aids the company to reduce the some of its debt, enhancing its value significantly to attract investors.

Conclusion

While Canadian Solar faces several headwinds going forward, I strongly believe in the company’s long-term performance. Canadian Solar’s international exposure is a plus point for long-term investors, and I think the stock is a decent buy at current levels.